Undertaking an establishment

Labour & European Law ReviewWeekly Issue 43319 August 2015

For a request to be valid under the Information and Consultation of Employees Regulations, it has to be made by at least 10 per cent of employees in the “undertaking”. In Moyer Lee and anor v Comely Workplace Ltd, the Employment Appeal Tribunal (EAT) held that the “undertaking” is the legal entity which is the employer.

Basic facts

If enough employees make a request under the Information and Consultation of Employees Regulations 2004, the employer has to negotiate an agreement with them in respect of information and consultation. Regulation 7(2)(a) of the regulations states that, to be valid, the request must be made by at least 10 per cent of the employees in the “undertaking”.

In this case, 28 employees who worked on a contract to provide facilities management services to the University of London (UoL) made a request under the regulations. Although they constituted 13 per cent of the number employed on that specific contract, they amounted to only 0.3 per cent of the company’s total workforce.

The company submitted an application to the Central Arbitration Committee (CAC) for a declaration that the employee request was invalid.

CAC decision

The CAC first had to decide the meaning of “undertaking”. Noting that the guidance to the regulations suggests that it means the employer as distinct from, say, an establishment or a part of an undertaking such as a division or business unit of a company, it concluded that the UoL contract was not the employer and was not even a separate part of the business of Comely Workplace Ltd.

It then considered whether this conclusion was inconsistent with the aim and intention of the European directive on which the regulations were based, but concluded that it was not. There were no grounds on which to conclude that the UoL contract was an undertaking as it was not a legal entity in its own right. Nor was it a stand-alone autonomous unit or a sub-division of Cofely Workplace Limited. As such the employee request was not valid.

The employees appealed on the basis that the terms “undertaking” and “establishment” were not mutually exclusive and could overlap where there were a number of sites on which employees operated, as with the UoL contract which involved four academic sites, five halls of residence and 17 academic flats.

EAT decision

The EAT, however, did not agree. Instead it held that “an undertaking is a legal entity capable of being the employer of employees serving it under a contract of employment, and that there is no principled basis for suggesting from within those Regulations that the undertaking should be construed as merely a division or department of that single employer”.

It also held that the distinction between undertaking and establishment in the directive would lack meaning if “establishment” could just as easily constitute an “undertaking”. It was clear from the guidance that there was a difference between the two and that if the government had intended that the word “undertaking” should be defined to include “a separate grouping of employees which is operationally autonomous and identifiable within the boundaries of a single employer”, then it would have opted for the term “establishment”.

It therefore rejected the appeal as well as an invitation to refer the matter to the Court of Justice of the European Union.

Comment

This decision does not affect entitlement to information and consultation if the part of the undertaking to which the employee is assigned is to be transferred. It does mean that the aims of the Information & Consultation Directive are frustrated where a company’s business comprises contracts which they effectively manage as separate operations. This is common in the contracting out business. It effectively means that unions have to organise across the different contracts operated by an employer.